Formulate a Financial Plan

Know Your Net Worth

Manage & Minimize Debt

Accumulate Assets

Budget to Live Within Your Means

Understand Investing Basics

Plan for Retirement

Insure People & Property

Deal with Financial Advisors

Review Your Employment Contract

Make Plans for Your Estate

Make Good Decisions


There’s a lot of information to process when selecting an advisor. Given what we’ve just learned, we can re-classify advisors into five categories, based on what really matters:

  1. Skilled, committed, caring advisors who charge fair fees
  2. Skilled, committed, caring advisors who charge too much
  3. Inept advisors who may be sincerely well-intentioned but just don’t know how to do their job properly
  4. Conflicted advisors who don’t always have clients’ best interests at heart
  5. Criminals who are out to embezzle and steal client assets

Needless to say, you want to find people in the first category and avoid all the others. People in the second category may have the requisite skills, but their unjustifiably high fees can do a lot of damage to your nest egg over extended periods. We examined those effects earlier in this book when discussing time value of money and compounding. Over decades, even seemingly small fees on the order of one percent can significantly undermine your wealth.

The broader challenge for you is that all prospective advisors claim to be in the first category, but only a subset will:

  1. Act in your best interest, as fiduciaries
  2. Operate independently
  3. Not charge commissions or be paid by anyone other than you
  4. Have a clean record
  5. Charge reasonable fees commensurate with value added
  6. Have at least a CFP designation
  7. Have at least five years of directly relevant work experience
  8. Be accessible and available when needed
  9. Be a skilled expert in the relevant space

Items 1 to 7 are relatively easy to verify, and you may want to do so before even agreeing to meet a prospective advisor.

Item 8, advisor accessibility, isn’t fully known until you begin receiving the service. Will the advisor provide you with personal service or pass you off to a junior associate? Your relationship with an advisor is very personal and requires a sense of connection and trust. It defeats the purpose of the exercise if you determine the applicant is the one for you, but he ends up handing you off to someone else. Insist that you expect accessibility and personal service. A good advisor will want to deliver precisely that level of service. You may be able to assess the advisor’s true intentions by speaking with some of her other clients or references. Use your doctor radar to determine the candidate’s sincerity.

Assessment of item 9, skill, can to some extent be discerned by looking at the applicant’s credentials: education, years of relevant work experience, continuing education, and professional designations beyond a CFP.   

I know some of you just want to be given the name of a great local advisor or a foolproof set of filters that unfailingly point to good candidates. In fact, you may wish such a magical algorithm had been shared on page 1 of this book, obviating the need for you to read through and learn all the other content. But there are too many sources of uncertainty for such simple tools to exist.

The best approach is to gain enough basic knowledge to assess item 9 on your own. That’s why this chapter is near the end of the book rather than at the beginning. By the time you get here you are more knowledgeable and better prepared to assess the skills and credentials of prospective advisors.

Yes, you can throw caution to the wind, bypass the educational content, and select the advisor who delivered a lunch-time lecture at your hospital or university. But in doing so you may deprive your family of an opportunity to interview and select a much better candidate.


Sourcing Candidates

A reasonable starting point is to obtain recommendations from people you know and trust. Ideally, recommendations should come from actual clients of the advisor in question, ensuring recommenders are personally familiar with the candidate’s alignment, compensation structure, expertise, and personal integrity.

Don’t automatically assume an advisor is honest if he’s recommended by a friend.

The most dangerous con-men are those who insinuate themselves using charm and empty promises throughout an entire network of friends. Regardless of the source of a recommendation, do some research on all candidates. This can be partly accomplished using public records: FINRA’s BrokerCheck and the SEC Adviser Info, Investment Adviser Public Disclosure. A Google search on the advisor and employer names is also advisable.

An honest advisor will respect your need to do this research, and will openly explain any entries you come across.

If you can’t get recommendations from friends or acquaintances, consider one of these two sites:

National Association of Personal Financial Advisors (NAPFA) – Fee-only financial advisors who take a fiduciary oath

Garrett Planning Network – A network of fee-only financial planners

Once you identify several decent candidates, you must interview them.